Buying Buffet

Just over a week ago I bought into Berkshire Hathaway (BRK.A) for the first time. Like Warren Buffet, I believe that America’s recovery will be strong and that the country will adapt and grow strongly … far more so than Europe. In my opinion, the US stands to benefit most from China’s increasing consumption (imports are growing into China faster than their exports) and benefit most from more general global growth thanks to its many dominant multi-national companies (Coke, Nike, IBM, Microsoft, Apple, to name just a few).

I certainly did not buy at the bottom (had I timed it perfectly I would have bought at $72,400 in March 2009) however I am happy with my $99,300 purchase price as it is still significantly below Berkshire’s peak price of $170,000 and I believe Warren has made some fantastic investments over the last 12 months which will bear fruits in the coming 12-24 months.

Berkshire Hathaway is getting 10% p.a. in interest payments from the likes of GE and Goldman Sachs and Warren has the option to convert the loans into stock should their value increase (which it already has). I estimate they are sitting on $10-20billion in profits not yet realised.

Warren also made his biggest purchase ever, that of railway line Burlington Northern Santa Fe … he called it ‘an all-in bet on an American recovery’. Considering he is advising the Obama administration on economic policy, I’m confident he knew exactly what he was doing!

I may never sell my shares in Berkshire Hathaway but imagine they will gain in value strongly in 2010 and 2011. Will re-visit this investment to see how it is going in a few months!